The San Diego County pension system has approved paying $550,000 to its outside investment consultant — not as his annual salary, but as a bonus.

Lee Partridge of Houston was hired in 2009 as portfolio strategist, replacing an on-staff chief investment officer who made $209,000 a year. Partridge’s consultancy is now paid more than $7 million a year, and the retirement board last week approved the bonus on a split vote after three tries.

Officials at the San Diego County Employees Retirement Association note that the money doesn’t just pay Partridge, it also pays others at his Houston firm, Salient Partners. And they say it’s well worth what they pay.

“SDCERA’s investment performance during the 39-month contract discussed at the board meeting has been excellent,” the agency said in a statement. “The portfolio generated 11.4 percent in investment returns, exceeding our 8 percent needed to fund the benefit.”

The payment comes at a time of great sensitivity about public agency compensation, when the nation is still stumbling its way out of an economic downturn.

Thousands of San Diego city employees took a 6 percent pay cut in 2009 and have yet to have it restored. San Diego Mayor Bob Filner lambasted a tourism and convention official last month whose entire salary is $435,000 year. A Bay Area county administrator made statewide news, too, when it was revealed that she was paid $423,000 a year.

Pay for Partridge’s stewardship is in an entirely different league, even by county administrator standards.

His firm’s bonus alone is more than double the base salary of Brian White, his boss as the SDCERA CEO. The bonus alone is nearly 10 times what the average county employee earns and 22 times the median annual benefit paid to the retirees who depend on the fund Partridge oversees.

The bonus granted also exceeds the combined salaries of the chief investment officers of the Imperial County, San Diego and Los Angeles city pension funds — all of whom matched or exceeded Partridge’s returns for San Diego County in 2012.

Too little
5% (15)

Too much
82% (259)

Just right
13% (42)

316 total votes.

Pension board members were obliged to pay a $500,000 bonus under Partridge’s 2009 contract because the fund surpassed its performance goal at the end of 2012. The board had discretion to grant an additional $213,000, but stopped short of that, paying only $50,000 as a discretionary extra.

Pension board members Dan McAllister, Dianne Jacob and David Myers opposed the incentive payment on a 5-3 vote last week.

“We reward performance, there’s no question about that,” said McAllister, who serves on the pension board because he is the elected county treasurer. “But in this case, it is discretionary and I just can’t support it.”

The agency noted that Partridge’s firm performed well during its first 39-month contract, which ended in December.

“The portfolio outperformed 97 percent of our public fund peers with assets over $1 billion while also incurring less risk than nearly 70 percent of them,” the agency said.

The agency’s data comes from a proprietary report that U-T Watchdog is unable to verify, using a 39-month window.

When the Watchdog surveyed pension systems that serve government employees in the region for calendar year 2012, Partridge’s performance was tied for third out of eight systems. Imperial County, where the top investment official is paid $125,000 a year, had the top performance for 2012.

Partridge’s firm has now been given a five-year contract that could pay $35 million or more depending on fluctuations in the $9 billion fund.

Paul Dorf is the managing director at Compensation Resources, a New Jersey firm that specializes in executive salaries and benefits.

He said public pension systems have no business paying $550,000 bonuses to staff or consultants — especially when the performance was comparable to or even exceeded by other portfolios.

“If his fund has grown by say 12 percent and the peer organizations also are going up by 12 percent, then he is no superstar,” Dorf said of Partridge. “They can have someone else in there doing the same job for much less.”

Retirees and taxpayers contacted this week thought the performance bonus was too generous, as well.

“In my view, Partridge is grossly overpaid to start with,” said Chris Brewster, a retired lifeguard chief. “Whether this bonus was required under the contract or discretionary, it’s outrageous.”

Rick Paul, a quality-assurance director for a small North County manufacturer, was flummoxed at the bonus.

“It’s unbelievable,” he said. “They don’t understand where the money’s coming from to pay this guy. It’s all taxpayer money and we’re arbitrarily giving it to a guy just because we like him.”

The pension board’s discussion focused on how much discretionary bonus to give, above the $500,000 mandated. The board settled on $50,000 extra.

“They have performed in some fashion that is over and above the benchmark line,” said E.F. “Skip” Murphy, who was on the winning side of a 5-3 vote.

That vote was preceded by two 4-4 deadlocks on higher amounts. Trustee Martin Cherry was the swing voter.

At first, he said, “I don’t see that they went above and beyond enough,” he said of Partridge’s firm. “I, too, will not support any additional funding.”

Later, Cherry supported the $50,000 discretionary payment.

“They may have done $50,000 worth of additional work above and beyond what they needed to do to perform well in the contract,” Cherry told his board colleagues.